E-Malt.com News article: USA, FL: Brew Hub coming to the rescue of brewers who struggle to keep up with demand for their beer

Business nightmares are plentiful for Joey Redner. As founder and CEO of Cigar City Brewing, he does his best to keep them at bay, The Tampa Tribune reported on July 12.

The first involves not being able to brew enough beer to meet demand for his skyrocketing Tampa-based craft beer brand.

He's already living through that nasty situation, even though Cigar City produces more than 40,000 barrels a year. There are some months when the number of unfillable orders for his Jai Alai IPA, Florida Cracker Belgian-style White Ale, Invasion Pale Ale and other beers almost matches the amount of cans and bottles he can actually ship from the Spruce Street brewery.

From there, the bad dream extends to thoughts of building a newer, larger brewery only to be saddled with $15 million in debt, a new partner or a bank loan to satisfy. Failure to meet customer demand, though, could mean being dropped by distributors unsure of whether they can keep bars, restaurants — and now stadiums and cruise ships — supplied with his suds.

To the rescue comes Brew Hub, a new 51,000-square-foot facility that sits along eastbound Interstate 4 in Lakeland that in August will begin producing beer for Cigar City and other emerging Florida craft breweries and brew pubs. For a fee, the St. Louis-based company offers craft breweries the brewing, packaging and distribution capacity to keep up with customer demand.

On July 24, Brew Hub will open a 3,000-square-foot tasting room in one corner of the manufacturing building where customers can sample beers being created by clients as well as those made by chief brewer Paul Farnsworth. Customer input, including from a smartphone app they can download to rate the beers, will be used to give clients feedback on each brand.

By mid-August, full-scale production is expected to begin on beers for Cigar City, Orange Blossom Pilsner of Orlando, California-based BJ's Restaurant & Brewhouse and Green Man Brewery of Asheville, North Carolina. Brew Hub also will help Islamorada craft brewer Keybilly Brewery reach a larger market with its Key lime-flavored ale.

If the Lakeland Brew Hub is a success, the company plans to expand with new facilities across the country. The ultimate goal is to reach 70 percent of the U.S. population by building six regional operations. Cigar City could then piggyback Brew Hub's expansion to make fresh beer in new markets beyond its home state without having to ship from Florida or build new breweries.

At the moment, craft brewers produce about 8 percent of the beer sold in the U.S., but the ratio is growing, especially among younger, more affluent drinkers who are shunning established brands by Anheuser-Busch InBev, Miller and Coors.

Craft brewers generally are defined as independent operators that produce fewer than 6 million barrels of beer annually, although a majority produce far less. In contrast, Anheuser-Busch generally produces more than 100 million barrels in the United States.

Brew Hub CEO Timothy Schoen said his company's goal is to help craft brewers tap into a market that is expected to reach 15 percent of U.S. beer drinkers within the next few years.

The company's clients are booked at the Lakeland facility for 2014 and 2015, with expectations that they will roll into future years if their demand continues, Schoen said. Brew Hub's initial plan for Cigar City, for example, is to produce about 17,000 barrels a year in Lakeland in addition to the 40,000 to 50,000 produced at Redner's Spruce Street plant.

Brew Hub is starting with a 75,000-barrel capacity, as well as a 100-barrel brew house and an eight-barrel pilot brewery where small-batch products and barrel-aging can be done.

“All the orders are in,” Schoen said. “Everyone has given us what we need and want. Once we get rolling, we can satisfy all their orders.”

If Brew Hub decides to expand, the Lakeland plant would have a 180,000-barrel maximum.

Farnsworth will use the pilot brewing system to create brands for the tasting room. If they test well among visitors, Brew Hub could produce its own beers for commercial distribution, Schoen said.

For Redner, the key issue in choosing Brew Hub as a production partner was control. At most contract facilities, craft brewers must hand over recipes and let outside staff make the beer.

Partnering with Brew Hub in what is called an “alternating proprietorship” allows Cigar City staff to use the equipment firsthand. For the length of the brewing contract, the equipment temporarily belongs to Cigar City.

“It's scary to just hand that control over to someone who doesn't understand the effort and struggle you've put into getting it where it is,” Redner said. “With partner-brewing, you have that piece of mind you can control and protect your baby and keep it what you want it to be.”

Also, Redner was more comfortable because Farnsworth helped assemble Cigar City's lab in Tampa, where tests are performed to ensure the beer has a consistent quality.

“I'll make less on every batch we make (at Brew Hub) because I'm paying them to do it, but I expose the company to less risk because I'm not laying out $10 (million) to $15 million to build a new brewery,” Redner said.

Using Brew Hub allows Cigar City to meet customer demand in Florida, where the brand is available in 94 percent of available markets, as well as expand into markets outside the state.

The Spruce Street facility, where the brand was founded five years ago, is near capacity, Redner said. Cigar City has hired BeerBev, a Miami-based brewery consultant, for a feasibility study to determine how the current brewery can be maximized.

But even if water capacity and electrical issues can be resolved, Cigar City will have issues with the flow of trucks constantly running through its property and on and off two-lane Spruce Street. If Cigar City theoretically could double its production capacity, that would double the space needed to store ingredients as well as the truck traffic. Not so at Brew Hub, where trucks have almost immediate access to I-4.

“Managing those trucks becomes a challenge,” Redner said. “What do you do? Do you have off-site storage so you can load at night and send them out? The brewery has a working tasting room, too. It's a huge challenge for us.”

Still, Cigar City continues to find new places to put taps. On Sunday July 13, the craft brewery formally announced a deal to supply beer to 13 Florida-based ships operated by Carnival Cruise Lines.

Cigar City Vice President Justin Clark said the arrangement is valuable beyond the 4,800 cases of beer the brewery expects to sell onboard. Florida's craft beer industry has more work to do to raise its profile. Being on Carnival's ships is key to expanding awareness as well as reaching vacationing consumers coming from other states.

“There are tons of bar owners who have never heard of us,” Clark said. “They'll now go on a cruise, try us out and go back to Pensacola or Miami or even Tampa and want this beer. That exposure is worth more than we could ever sell volume-wise.”

Redner said those unfamiliar with the business side of craft brewing underestimate the need for brewing capacity. It's why established craft brewers such as Sierra Nevada Brewing of California and Oskar Blues and New Belgium Brewing of Colorado recently opened production facilities on the East Coast.

“A lot of people say we have so much more capacity coming online, but I say there also are a lot more mouths coming online,” Redner said. “The goal is to make as much beer as people want to buy.”


16 July, 2014